Chilton completes merger with Atlantic Health System

Atlantic Health System and Chilton Hospital today announced the completion of their merger, which adds the Pompton Plains-based hospital and affiliated Chilton Health Network sites to one of the largest non-profit health care organizations in New Jersey.

As part of its addition to Atlantic Health System's facilities, the hospital will now be known as Chilton Medical Center.

"After more than a year since we began the merger process, it is with great honor that we welcome Chilton into Atlantic Health System," said Joseph A. Trunfio, president and chief executive of Atlantic Health. "With the addition of Chilton, our organization continues to grow stronger and better able to serve our community."

Following the merger, Chilton Medical Center will continue to serve as a licensed, acute care hospital while also offering its community easier access to the world-class services offered by other members of the Atlantic Health System.

Trunfio said Chilton further strengthens the system’s geographic footprint. “As we began to evaluate the challenges and opportunities of the changing healthcare landscape we made the determination that to be effective in the area of population health management that we would need to have a larger network of hospitals and physicians to serve that population base if we were going to impact health going forward in the future.”

He noted that the New Jersey hospital industry continues to consolidate. “A process is underway, at least in the northern part of New Jersey, where a number of the community hospitals have solicited requests for proposals in terms of seeking potential system partners. So to the extent that those opportunities arise, we continue to be in dialogue with some of the other community hospitals to our west and to our south.”

Healthcare economists have long warned that hospital mergers drive up health care spending because larger hospital systems have more leverage when negotiating reimbursement contracts with health insurers.

But Trunfio took issue with that. He said when Newton joined the Atlantic system in 2011, it was not part of the network of the state’s largest health insurer, Horizon Blue Cross Blue Shield of New Jersey. “When Newton joined the (Atlantic ) system we were able to bring that hospital into all of the major insurance contracts,” including Horizon. “What that did was to provide access (to Newton) for employers and employees who held Horizon insurance in Sussex County.”

He said both the Atlantic system and Chilton negotiated new, multi-year contracts with the major insurers prior to their merger.

“Our hope is that by having the ability to leverage some of the scale and scope of the organization, especially in the back office in terms of IT purchases and in terms of capital purchases, that we can hopefully lower costs while simultaneously improving quality.”

Trunfio said Atlantic is assuming Chilton’s $43 million in debt and has committed to spend $15 million on IT over the next few years, as well as $10 million in capital improvements per year for the next five years.

Zastocki said Chilton just competed a $24 million renovation has a positive financial margin.

“But when we really began to look at (health care reform) and our ability to manage population health, understanding what it would take for IT infrastructure and some of the other initiatives we needed to do , we began to say ‘would we, 3 to 5 years from now, feel as though we would be financially constrained?”

Trunfio said “Chilton made a proactive decision, when they were healthy and well functioning and a very attractive partner, to make a determination that this was the best time for them to be able to go out and choose who they would like to be affiliated with.”

"Chilton and Atlantic Health System are focused on enhancing the scope and breadth of health care services care available at Chilton while providing seamless access to the Atlantic Health System network of outstanding services," said Dr. Deborah K. Zastocki, the Chilton Medical Center president. "After many years of successfully working together, we can now work as one, to not only fulfill the health needs of our region, but build stronger, healthier communities."

Atlantic Health System employs more than 11,000 people throughout Morris, Union, and Sussex counties, and has 1,310 licensed beds, including those at the Atlantic Rehabilitation in Morristown.

There are over 193,100 emergency visits each year, including Morristown, Overlook, Newton, and at Overlook Emergency Services, Union Campus. Located at the crossroads of Morris, Passaic and Sussex counties, Chilton Medical Center employs 1,400 people and has 260 licensed beds. Annually, it serves more than 160,000 patients across 33 communities.

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Beth Fitzgerald

Beth Fitzgerald reports on health care, small business and higher education. She joined NJBIZ in 2008 after a 34-year career at the Star-Ledger and has been reporting on business in New Jersey since 1978. Her email is beth@njbiz.com and she is @bethfitzgerald8 on Twitter.